Value-add describes a property whose income can be raised by doing specific work: renovating units, correcting below-market rents, fixing operations, adding a use, or curing something that keeps buyers away. It is a plan with a cost and a timeline attached, not a description of an old building.
- A real value-add names the moves, the cost of each, and the rent or expense line each one moves. Anything vaguer is a mood.
- The work is priced by whoever does it, not by the seller who did not. Get the numbers from a contractor before paying for the upside.
- Someone has to fund it and carry it while it happens. The plan is a capital budget and a vacancy period, both of which cost money.
- Upside already priced into the asking price is not upside. It is the seller charging today for work the buyer has not done yet.
Related terms
All termsLoss to Lease
Loss to lease is the gap between what units would rent for at market today and what the current leases actually charge.
OwnershipCapEx (Capital Expenditure)
Capital expenditure is money spent on the building itself rather than on running it: a roof, a new electrical panel, windows, a repiping, a parking lot.
InvestmentProforma
A proforma is the projected income and expense statement for a property: what the next owner is being asked to believe.
Terms arrive with the writing.
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